Here are the parts you'll need:
1/4" stereo jack Radioshack 274-141 or Radioshack 274-312
LED, I used Radioshack 276-017
1/4 watt current limiting resistor- you'll calculate the correct value for your LED
22 gauge stranded wire
Prepare the Jack:
My jack came with a plastic casing, I removed this to expose the three leads of the jack (this is a stereo jack so the three leads are for left channel, right channel, and ground, a mono jack will only have two leads). Solder a green wire to each of the signal leads of the jack (fig 4). The larger lead is the ground lead (fig 5), I'll solder the LED directly to this pin once I've soldered a current limiting resistor to it.
Prepare the LED:
I used a 5V supply to power my LED.
I calculated the value of the current limiting resistor from the following information:
LED forward current: 25mA
LED forward supply: 3.3V
voltage across the current limiting resistor = 5V - 3.3V = 1.7V
V = I*R
R = V/I
R = 1.7V/0.025A
R = 68Ohms
Remember, this is an absolute minimum value for the current limiting resistor, you should always add a little extra resistance to ensure that you are not running your LED at its maximum ratings. For these LEDs, I used a 100ohm resistor instead of a 68ohm. Don't worry about using too large of a resistor, worst case scenario your LED will just glow dimmer, you will not break them. If you are not sure about the ratings of your LED, use a 220ohm resistor.
Solder the resistor to the anode (long lead) of the LED. Solder a red wire to the other side of the resistor. Cover the whole lead with shrink wrap so that it is completely insulated (fig 7).
Attach the LED:
Solder the cathode of the LED to the ground pin of the jack so that the LED is pointing into the jack. Make sure to leave enough room for the male end of the cable to fit inside the jack. Solder a black wire to this junction. I like to use some hot glue to keep everything insulated and supported in the jack and then cover the whole thing with electrical tape. Connect the red wire to 5v, the black wire to ground, and the green wires to your signal.